Whether you are buying your first home, or have been making mortgage payments for years, you may be thinking about reducing this obligation, faster. In fact, changing your term, the payment amount and even making lump sum payments could pay down your mortgage more quickly.

Reduce the amortization period
The amortization period is the length over which the debt is carried. By reducing this time period, from 25 years to 15 years, you will save thousands in interest. The following chart shows these savings.

Interest rate

*Monthly payment

*Monthly payment

difference

interest

(per annum)

15-year

25-year

savings

7%

$893.26

$700.43

$192.83

$49,332.18

8%

$948.16

$763.21

$184.95

$58,299.80

*Compounded half-yearly, not in advance.
**Interest savings over the life of the mortgage, assuming constant interest rate throughout amortization period.
Based on figures obtained from RBC Royal Bank

Make lump-sum pre-payments
Many lending institutions allow for lump sum payments. On the anniversary date you can make a payment of a specified amount towards the mortgage. You may also be able to double up on regular payments on any payment date. These double-up payments are applied to the principal.

Increase the amount of your payments
Any additional amount you can make on your principal reduces the amount of interest. Check with your lender when you have additional cash reserves.

The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Toronto Real Estate Board. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.